Firms prosecuted for foreign bribery experience significant costs. Their share values decline by 3.11%, on average, on the first day that news of the bribery action is reported, and by 8.98% over all announcements related to the regulatory enforcement action.

The electronic availability of data on financial restatements, class action lawsuits, and regulatory actions has facilitated significant advances in our understanding of the causes and effects of financial misconduct. Nearly 100 published studies examining aspects of financial misconduct rely on data from one of four publicly available databases: the Government Accountability Office (GAO) and Audit Analytics (AA) databases of restatement announcements, the Securities Class Action Clearinghouse (SCAC) database of securities class action lawsuits, and the Securities and Exchange Commission’s series of Accounting and Auditing Enforcement Releases (AAERs). In this paper we describe and document five types of potential problems in these databases that, if not recognized and addressed, can affect the validity and interpretation of empirical findings in this area.

We examine the monetary benefits of cooperation for 1,059 enforcement actions initiated by the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) for financial misrepresentation from 1978-2011. We estimate that firm cooperation results in a 12% increase in the probability of regulators bringing charges against firms. However, using a Heckman full maximum likelihood estimator, we find that being credited for cooperation by regulators reduces the monetary penalties firms pay by 35% (conversely, non-cooperation increases monetary penalties by 53%).